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Item 1. Business

2021-10-04 compared with 2020-09-29 · 157 added, 158 removed, 382 unchanged (45% of the section changed)

We are a leading provider of advanced communications solutions for both commercial and government customers worldwide.

Our solutions fulfill our customers’ needs for secure wireless communications in some of the most demanding environments, including those where traditional communications are unavailable or cost-prohibitive, and in mission-critical scenarios where performance is crucial.

We are a leading global provider of next-generation 911 emergency systems ("NG-911") and secure wireless communications technologies.

In recent years, an increase in market demand for global voice, video and data usage has contributed to our growth.

As more fully described elsewhere in this Form 10-K, fiscal 2020 was challenging due to the coronavirus disease 2019 pandemic ("COVID-19").

The impact of COVID-19 on our customers resulted in significant order delays and lower net sales for us as compared to our original business outlook for the year.

Despite COVID-19, we achieved fiscal 2020 consolidated net sales of $616.7 million, consolidated net income of $7.0 million and Adjusted EBITDA of $77.8 million.

We also generated $52.8 million of cash flows from operations.

We completed two small acquisitions and finished fiscal 2020 with a solid backlog.

As COVID-19 impacts subside, we believe that our business performance in future periods will improve from current levels.

We also currently have two pending strategic acquisitions that we believe will significantly strengthen our company.

On November 21, 2019, we announced that we entered into an agreement to acquire UHP Networks Inc.

and its sister company (together, “UHP”), a leading provider of innovative and disruptive satellite ground station technology solutions.

With end-markets for high-speed satellite-based networks significantly growing, our acquisition of UHP will allow us to enhance our solution offerings with low cost time division multiple access (“TDMA”) satellite modems which we do not currently offer.

On January 29, 2020, we announced a highly strategic acquisition of Gilat Satellite Networks Ltd.

Gilat is a worldwide leader in satellite networking technology, solutions and services, with market leading positions in the satellite ground station and in-flight connectivity solutions markets and deep expertise in operating large network infrastructures.

After we announced the Gilat acquisition, the COVID-19 pandemic resulted in a sudden and steep decline in the travel and aviation markets in which many of Gilat’s customers operate and a significant slowdown in Gilat's business.

In July 2020, we commenced litigation in the Delaware Court of Chancery seeking certain declaratory judgments including a declaratory judgment that Gilat has suffered a Material Adverse Effect (as defined in the Merger Agreement) and that, as a result, we are not obligated to complete the acquisition.

The pending acquisitions of Gilat (and related litigation) and UHP are discussed in more detail in Part II - "Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations – Acquisition Plan Update" and "Notes to Consolidated Financial Statements - Note (13)(a) - Commitments and Contingencies - Legal Proceedings and Other Matters" included in "Part II - Item 8.- Financial Statements and Supplementary Data," included in this Annual Report on Form 10-K.

We provide our solutions to both commercial and governmental customers.

As more fully described elsewhere in this Form 10-K, we navigated the challenges of operating our global business during the period where COVID-19 impacted many of our customers.

We achieved fiscal 2021 consolidated net sales of $581.7 million and achieved significant year-over-year bookings and backlog growth.

We completed the acquisition of a leading provider of innovative and disruptive satellite ground station technology solutions.

We also entered into a multi-year agreement enabling a large new customer to potentially order hundreds of millions of dollars of our next-generation satellite earth station technology that can be used with thousands of Low-Earth-Orbit ("LEO") satellites reportedly being launched over the next several years.

Adding to our strength, we won over $200.0 million of new NG-911 contract awards that we believe can provide years of recurring revenue.

We believe that as COVID-19 subsides and the global economy fully reopens, our business performance in future periods will improve from current levels.

Our Business Outlook for Fiscal 2022 is discussed further in Part II - "Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations - Impact of COVID-19 and Business Outlook for Fiscal 2021.

" For a definition and explanation of Adjusted EBITDA, see Part II - " Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations - Impact of COVID-19 and Business Outlook for Fiscal 2022 ." For a definition and explanation of Adjusted EBITDA, see Part II - "Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations - Comparison of Fiscal 2021 and 2020 - Adjusted EBITDA ."

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(1) We Have Significant Exposure to Large, Growing End Markets

We believe we are well positioned to capitalize on some of the most significant long-term technology trends occurring worldwide and that customers around the world will increasingly turn to us to fulfill their needs for secure wireless communications in some of the most demanding environments, including those where traditional communications are unavailable or cost-prohibitive, and in mission-critical scenarios where performance is crucial.

These important technology trends include growth in global wireless penetration and consumption, the need for public safety agencies to seamlessly integrate various networks and protocols and utilize precise location to connect individuals with first responders, the rapidly expanding breadth of High Definition ("HD") and 4K broadcasting content and the need for governments to have more modern and mobile communications and transmission equipment to successfully complete mission-critical goals.

We believe that all these long-term trends generate growth in global voice, video and data usage that, in turn, drives increased long-term demand for the secure wireless communication solutions that we provide.

These important technology trends include the expansion of 5G mobile networks and the integration of satellite communications into mobile phones, the need for public safety agencies to seamlessly integrate various networks and protocols and utilize precise location to connect individuals with first responders, the expanding breadth of High Definition ("HD") and 4K broadcasting content, and the need for governments to have more modern and mobile communications and transmission equipment to successfully complete mission-critical goals.

We are in the process of further focusing both our research and development and marketing efforts to advance our next-generation satellite technology solution offerings that are targeted for use on new broadband satellite constellations.

Thousands of new LEO, medium-earth-orbit ("MEO") and even geosynchronous equatorial orbit ("GEO") satellites are reportedly being launched over the next several years.

Satellite constellations will provide internet access across the world, support increasing demand for data transmission, and will be facilitated by solutions that we provide, including ground station equipment such as Single Channel per Carrier ("SCPC") and time division multiple access (“TDMA”) modems, solid-state amplifiers and X/Y steerable antennas.

In fiscal 2021, we entered into a strategic and highly valued multi-year agreement enabling a large new customer to potentially order hundreds of millions of dollars of our next-generation satellite earth station technology that can be used with the thousands of LEO satellites reportedly being launched over the next several years.

Shortly after we signed this agreement, we received our first order valued at more than $13.0 million to make certain customizations on behalf of this customer.

Work on these efforts commenced immediately.

(2) We Believe We Are a Market Leader in the End-Markets That We Serve

Commercial Solutions Segment

Satellite Ground Station Technologies - We believe we are the leading provider of Single Channel per Carrier ("SCPC") satellite earth station modems, solid-state amplifiers and traveling wave tube amplifiers.

Many of our key satellite earth station modems incorporate Turbo Product Code ("TPC") forward error correction technology and bandwidth compression technology which enables our customers to optimize their satellite networks by either reducing their satellite transponder lease costs or increasing data throughput.

Satellite Ground Station Technologies - We believe we are the leading provider of satellite earth station modems, solid-state amplifiers and traveling wave tube amplifiers.

Many of our key satellite earth station modems incorporate Turbo Product Code ("TPC") or Low Density Parity Check ("LDPC") forward error correction and bandwidth compression technologies, which enable our customers to optimize their satellite networks by either reducing their satellite transponder lease costs or increasing data throughput.

We hold leadership positions in the market for high throughput modems used in cellular backhaul, a market that has been rapidly growing due to increased mobile phone use as well as LTE and 5G deployments.

In fiscal 2021, we added to our product portfolio software-defined TDMA technology, which delivers industry-leading bandwidth-efficiency and flexibility to our customers.

Our amplifier products are used to amplify signals carrying voice, video or data for air-to-satellite-to-ground communications and are vital to satellite communication applications such as traditional broadcast, direct-to-home ("DTH") broadcast and satellite newsgathering.

We differentiate our amplifier product offerings by our ability to develop the most efficient size, weight and power profile.

Certain of our amplifiers are DO-160 (an airborne quality standard) certified and when incorporated into an aircraft satellite communication system, can provide passengers, both commercial and military, with email, Internet access and video conferencing.

Public Safety and Location Technologies - We believe that we are a leader in public safety communication and location technologies used for routing 911 calls.

We believe that our expertise complying with regulatory and performance restrictions, particularly in challenging frequency bands such as X, Ka and Q, is a key differentiator.

Demand for equipment in these challenging frequency bands is expected to grow over the coming years as new constellations are launched, such as Amazon Kuiper, SpaceX Starlink, Telesat Lightspeed and High Throughput Satellites ("HTS") from other providers.

Certain of our amplifiers are DO-160 certified (an airborne quality standard) and when incorporated into an aircraft satellite communication system, can provide passengers, both commercial and military, with email, Internet access and video conferencing.

Public Safety and Location Technologies - In fiscal 2021, we were recognized by Frost & Sullivan, a leading industry research firm, for registering the most significant year-over-year market share increase among all NG-911 primary contract holders, growing our market share from an estimated 17.3% in 2019 to 26.2% in 2020, as calculated by Frost & Sullivan.

By closing statewide contracts in Arizona, Iowa, Ohio, Pennsylvania and South Carolina, our direct NG-911 contracts now represent a population of over 60 million in the U.S., and over 25 million in Australia via Next Generation 000 contracts.

As such, we believe that we are a leader in public safety communication and location technologies.

We meet the ISO 27001 data security standard and believe we have significant market share in the routing of U.S.

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E911 refers to 911 calls for both wireline and wireless telephones that are enhanced to provide the caller's location information.

We are focusing our marketing and research and development efforts to meet system standards for next generation 911 ("NG-911"), which refers to an Internet Protocol ("IP") based system that allows digital information (e.g., voice, photos, videos, text messages) to flow seamlessly from the public, to the PSAPs and on to emergency responders.

Our Short-Messaging Service ("SMS") Center software has been used by Mobile Network Operators (“MNOs”) to enable the exchange of text or data messages to and from wireless devices for almost two decades across 2G, 3G and 4G networks.

Our flexible and modular platforms enable the MNOs with a wide range of positioning technologies based on Third Generation Partnership Project (“3GPP”) standards.

Additionally, we offer Location Studio TM , a complete end-to-end location services platform consisting of maps, geoservices, application programming interfaces ("APIs") and software development kits ("SDKs") enabling MNOs, application developers, public safety customers, and enterprises to build custom and unique applications.

We are focusing our marketing and research and development efforts to meet system standards for NG-911, which refers to an Internet Protocol ("IP") based system that defines how digital information (e.g., voice, photos, videos and text messages) flows seamlessly from the public to the PSAPs, and on to emergency responders.

With more than 85 global deployments of our Location Based Services (“LBS”) platform, we are a leading global provider of device location for both public safety and commercial applications.

Leveraging decades of our location-based technology expertise, our solutions support the generation and distribution of location information for both indoor and outdoor environments.

We have developed industry leading 2G through 5G mobile network and WiFi location functions, robust mapping, navigation and geolocation solutions incorporated by industry verticals such as public safety, automotive manufacturing, mobile network operators (“MNOs”) and retail.

We provide a high-capacity, multiprotocol Short-Messaging-Service (“SMS”) platform for Person-to-Person (“P2P”), Application-to-Person (“A2P”) and Machine-to-Machine (“M2M”) communications.

In addition, we offer Location Studio®, a complete end-to-end location application platform consisting of maps, map data, geo-services, application program interfaces (“APIs”) and software development kits ("SDKs") enabling MNOs, application developers, public safety ecosystems, and enterprises to build custom and unique applications.

Government Solutions Segment

Mission-Critical Technologies - We are a key supplier to large governments (particularly the U.S.

government) and large prime contractors, for mission-critical technologies, primarily tactical satellite-based technology solutions, field support services and satellite component supply chain management.

Tactical Communications Technologies - We are a key supplier to large governments (particularly the U.S.

government) and large prime contractors for tactical communications technologies, primarily tactical satellite-based technology solutions, field support services and satellite component supply chain management.

We are a prime contractor under several indefinite delivery, indefinite quantity ("IDIQ") defense contract vehicles, including the:

Army’s Global Tactical Advanced Communications Systems ("GTACS") contract, (ii) U.S.

Army’s Global Tactical Advanced Communications Systems (“GTACS II”) contract, (iii) U.S.

Navy’s Seaport Next Generation (“SeaPort-Nxg”) contract, (iv) Complex Commercial SATCOM Solutions ("CS3") contract;

and (v) Communications Electronics Command ("CECOM") Responsive Strategic Sourcing for Services ("RS3") contract with the U.S.

Army’s Global Tactical Advanced Communications Systems ("GTACS") contract;

Army’s Global Tactical Advanced Communications Systems (“GTACS II”) contract;

Navy’s Seaport Next Generation (“SeaPort-Nxg”) contract;

(iv) Complex Commercial SATCOM Solutions ("CS3") contract;

(v) Communications Electronics Command ("CECOM") Responsive Strategic Sourcing for Services ("RS3") contract with the U.S.

Army Contracting Command - Aberdeen Proving Ground (“ACC-APG”);

and (vi) Advanced Battle Management System ("ABMS") contract for the Air Force Life Cycle Management Center.

We provide field support sustainment services, centralized and deployed depot services and technology insertion services to the U.S.

Army’s AN/TSC-198 family of communication systems that are commonly referred to as "SNAP" (Secret Internet Protocol Router ("SIPR") and Non-secure Internet Protocol Router ("NIPR") Access Point) Very Small Aperture Terminals ("VSATs").

We also provide sustainment services for the U.S.

Army’s Blue Force Tracking-1 ("BFT-1") system.

Our field support services include providing U.S.

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and decommissioning at end of life.

We also provide to customers worldwide a full line of X/Y satellite tracking antenna systems ranging in sizes from 30cm to 13m, as well as radomes, ideal for LEO, MEO and GEO constellations.

High-Performance Transmission Technologies - We are a world leader in the design and supply of troposcatter equipment, and a key supplier of radio frequency ("RF") solid-state, high-power amplifier and switching technologies.

We have designed, manufactured and delivered troposcatter systems (sometimes referred to as over-the-horizon ("OTH") microwave products and systems) for over fifty years and are one of the largest independent suppliers of solid-state, high-power microwave amplifiers, which reproduce signals with high power and are extremely complex and critical to the performance of the systems into which they are incorporated.

We also provide to customers worldwide a line of X/Y steerable satellite tracking antenna systems ideal for LEO, MEO and GEO constellations.

High-Performance Transmission Technologies - We are a world leader in the design and supply of troposcatter equipment, and a key supplier of radio frequency ("RF") microwave solid-state, high-power amplifier and switching control technologies.

We have designed, manufactured and delivered troposcatter systems (sometimes referred to as over-the-horizon ("OTH") microwave products and systems) for over fifty years and are one of the largest independent suppliers of solid-state, high-power RF microwave amplifiers and integrated transmit receive hardware, which reproduce signals with higher power, are extremely complex, and are critical to the performance of the systems into which they are incorporated.

Our CS67PLUS software defined, adaptive troposcatter radio can operate at over 200 megabits per second ("Mbps").

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These dual frequency systems are designed to operate in harsh environmental conditions and are protected from Electromagnetic Interference and Electromagnetic Pulse (“EMI/EMP”).

Many solid-state power amplifier and switching technologies are produced in-house by large companies;

Many solid-state RF microwave amplifier and switching control technologies are produced in-house by large companies;

however, our expertise has created a cost-effective and technologically superior alternative to in-house sourcing.

Some of the companies who have outsourced amplifier development and production to us include Rockwell Collins, Inc., European Aeronautic Defence and Space Company ("EADS"), Lockheed Martin Corporation, L3Harris Technologies, Inc., Northrop Grumman Corporation, BAE Systems Plc and Raytheon Technologies Corporation.

Some of the companies who have outsourced amplifier development and production to us include Rockwell Collins, Inc., European Aeronautic Defense and Space Company ("EADS"), Lockheed Martin Corporation, L3Harris Technologies, Inc., Northrop Grumman Corporation, BAE Systems Plc, the U.S.

Navy and Raytheon Technologies Corporation.

Our amplifiers are also used in oncology treatment systems that allow physicians to give cancer patients higher doses of radiation that are more closely focused on cancerous tissue, thereby minimizing damage to healthy tissue.

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Examples of our industry-leading innovation include:

Our Heights TM Networking Platform – Our Heights TM networking platform ("Heights") is a cornerstone of our current research and development efforts and a continuing focus of our satellite earth station equipment sales and marketing efforts.

Heights TM is an advanced networking platform that combines our most efficient waveforms, compression engines and the ability to provide dynamic bandwidth and power management to meet the demands of customers operating on traditional fixed satellite service systems ("FSS") while providing advantages for customers who plan to transition to high throughput satellite ("HTS") systems in the future.

Our VSAT Networking Technologies and Platforms – For the past several years, we have developed and manufactured Heights TM ("Heights").

Heights TM is an advanced satellite earth station networking platform that combines our most efficient waveforms, compression engines and the ability to provide dynamic bandwidth and power management to meet the demands of customers operating on traditional fixed satellite service systems ("FSS"), while providing advantages for customers who plan to transition to HTS systems in the future.

Heights TM is ideally suited for cellular backhaul, universal service obligation networks and other applications that require high performance in a hub-spoke environment.

Heights TM solutions are designed to deliver the highest Internet Protocol bits per Hertz in its class.

Our Solacom Software Solutions – In fiscal 2019, we acquired Solacom Technologies, Inc.

(“Solacom”), a leading provider of NG-911 solutions for public safety agencies.

Solacom has developed a best-in-class call handling solution marketed under the Guardian brand name which provides an integrated text-to-and-from 911 solution on a unified platform.

In fiscal 2021, we introduced a TDMA technology solution which offers best-in-class support for very large networks.

With an estimated 3 billion people globally who are not connected to any wireless services, this technology allows our customers to cost-effectively provide services to end-users with the quality and reassurance of the Comtech brand and service offerings.

We also intend to offer a solution that combines our Heights Dynamic Network Access ("H-DNA") and TDMA technologies in a single VSAT platform so that we can deliver a solution that will deliver increased value to our customers.

Additionally, at the start of our fiscal 2022, we announced a technology and business development partnership with Kymeta Corporation, a satellite communications company to broaden network offerings by combining the Kymeta TM u8 terminal with our SLM-5650B modem and UHP-200 Universal Satellite Router.

This solution will enable new and existing U.S.

Department of Defense and commercial customers to operate state-of-the art technologies using cost-effective and seamless VSAT router solutions.

Our Solacom Software Solutions – We offer a best-in-class call handling solution marketed under the Solacom Guardian brand name, which provides an integrated text-to-and-from 911 solution on a unified platform.

The solution provides a flexible user interface, adapts to varying customer environments and preferences, provides powerful call conferencing capabilities, enhanced reporting capabilities and offers geospatial 911 location call display directly from a customized map.

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We are investing in product enhancements of the Guardian software, including developing a cloud-based version so that we can offer software as a service ("SaaS") type solutions to our public safety customers.

Our Compact Over-the-horizon Mobile Expeditionary Terminal (“COMET”) – In fiscal 2020, we introduced the Comtech COMET, the world’s smallest OTH microwave troposcatter terminal.

COMET, which stands for Compact Over-the-horizon Mobile Expeditionary Terminal, is rapidly deployable, low power and highly portable.

Our Compact Over-the-horizon Mobile Expeditionary Terminal (“COMET TM ”) – We offer the Comtech COMET TM , the world’s smallest OTH microwave troposcatter terminal.

Our Comtech COMET TM is rapidly deployable, low power and highly portable.

Troposcatter technology has long been associated with large antennas and high-power amplifiers that require kilowatts of prime power and large trucks to transport them to the field.

The COMET has fundamentally changed this paradigm.

The COMET is capable of being transported in a carry case by a single individual and set up in under fifteen minutes.

The COMET is ideally suited for situations where high bandwidth backhaul communications are required, extending critical services into areas where there is no communications infrastructure, or the infrastructure has been destroyed.

Special Forces have already begun procuring and deploying the COMET for high reliability, mission essential communications.

Our "XyPoint®" Mobile Location Platform – Our "XyPoint®" Mobile Location Platform is a standards-compliant, commercially available system used for the location of mobile devices connected to 2G, 3G, 4G-LTE, 5G NGC and Wi-Fi networks.

Our XyPoint® platform provides device location for both public safety and commercial applications and enables device positioning for smartphones, tablets and internet of things ("IoT") devices connected to an MNO’s 5G cloud network.

The COMET TM has fundamentally changed this paradigm.

The COMET TM is capable of being transported in a carrying case by a single individual and set up in under fifteen minutes.

The COMET TM is ideally suited for situations where high bandwidth backhaul communications are required, extending critical services into areas where there is no communications infrastructure, or the infrastructure has been destroyed.

Special Forces, as well as non-U.S.

NATO forces, have already begun procuring and deploying the COMET TM for high reliability, mission essential communications.

Our "XyPoint ® " Mobile Location Platform – Provided to MNOs globally, our virtualized LBS platform is a high availability robust solution with multiple positioning technologies, that allows authorized users to locate and track specific mobile devices and monitor specific areas of interest.

MNOs can use this platform for location accuracy to support a wide variety of use cases, including public safety, location intelligence, network optimization and big data analytics.

On the legacy front, our LBS platform is compatible within 2G through 4G wireless networks, as well as an enabler to the MNOs to seamlessly migrate to cloud native environments, as they start their migrations to 5G.

(4) We Have a Diverse Global Customer Base

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We believe that our customers recognize our ability to develop improved technologies and to meet stringent program requirements.

Our ability to solve complex problems is well known and we believe we a have strong relationships with our customers.

Our ability to solve complex problems is well known and we believe we have strong relationships with our customers.

We hold prime positions on several key contracts and have had a long history of servicing key programs.

Business Segments

Fundamentally, we offer advanced secure wireless communication technologies with expertise in the satellite communications and cellular markets.

Fundamentally, we offer advanced secure wireless communications technologies with expertise in the satellite communications and cellular markets.

We believe these markets are undergoing a period of significant growth and rapid technological change.

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Technologies Public Safety and Location

Technologies Mission-Critical

Technologies Tactical Communications

Technologies High-Performance Transmission

• Satellite ground station technologies such as single channel per carrier modems and Heights TM networking platform that facilitate the transmission of voice, video and data over satellite links

• Satellite ground station technologies such as SCPC modems, TDMA modems and networking platforms that facilitate the transmission of voice, video and data over satellite links including LEO and HTS satellite constellations

• Solid-state and traveling wave tube amplifiers used to amplify signals from satellite ground stations

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• Call Handling applications for PSAPs

• Software and equipment for location-based and messaging services for various applications including public safety services

• Software and equipment for location-based and messaging services for various applications, including both public safety and commercial services

• Tactical satellite-based communications, field support and end-to-end integration

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• Procurement and supply chain management of high reliability EEE parts for satellite, launch vehicle and manned space applications

• Over-the-horizon microwave equipment that can transmit digitized voice, video and data over distances up to 200 miles using the troposphere and diffraction

• Solid-state, high-power amplifiers designed for radar, electronic warfare, jamming, medical and aviation applications

Commercial Solutions Segment Representative Customers Government Solutions Segment Representative Customers

• Over-the-horizon microwave equipment that can transmit digitized voice, video and data over distances up to 200 miles using the troposphere and diffraction, including the Comtech COMET TM

• Solid-state, RF microwave high-power amplifiers and control components designed for radar, electronic warfare, jamming, medical and aviation applications

Commercial Solutions Segment

Representative Customers Government Solutions Segment

Representative Customers

Satellite systems integrators, wireless and other communication service providers and broadcasters

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Satellite broadcasters, such as The DIRECTV Group and EchoStar Corporation

state and local governments, such as the Commonwealth of Massachusetts, Iowa, Maine, South Carolina, the State of Washington and Tennessee

state and local governments, such as Arizona, the Commonwealth of Massachusetts, the Commonwealth of Pennsylvania, Iowa, Maine, South Carolina and the state of Washington

End-customers also include AT&T Inc., BT Group plc., China Mobile Limited, CenturyLink, Inc., Claro Argentina, Comcast Corporation, Intelsat S.A., Speedcast International Limited, Nokia Corporation, QUALCOMM Incorporated, SES S.A., T-Mobile USA, Inc.

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Armed Forces, NATO and foreign governments (i.e., ministries of defense)

Domestic and international defense customers, prime contractors and system suppliers such as Lockheed Martin Corporation, L3 Harris Technologies, Inc., Northrop Grumman Corporation, Raytheon Technologies Corporation, Rockwell Collins, Inc., SES S.A., and The Boeing Company

Medical equipment companies, such as Varian Medical Systems, Inc., and aviation industry system integrators such as Collins Aerospace (a subsidiary of United Technology Corporation)

Medical equipment companies, such as Varian Medical Systems, Inc., and aviation industry system integrators such as Collins Aerospace (a subsidiary of Raytheon Technologies Corporation) and Telephonics Corporation

Foreign government customers in the Middle East, Europe, North Africa, Latin America and Asia Pacific and related prime contractors and systems integrators

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Commercial Solutions Segment

Our Commercial Solutions segment offers satellite ground station technologies (such as modems and amplifiers) and public safety and location technologies (such as 911 call routing, 911 call handling and mapping solutions) to commercial customers and smaller government customers, such as state and local governments.

Our Commercial Solutions segment offers satellite ground station technologies (such as SCPC and TDMA modems and amplifiers) and public safety and location technologies (such as 911 call routing, 911 call handling and mapping solutions) to commercial customers and smaller government customers, such as state and local governments.

This segment also serves certain large government customers (including the U.S.

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Satellite Ground Station Technologies

We offer our customers one-stop-shopping for satellite ground station technologies including modems, amplifiers, frequency converters and network software for customers who utilize satellite communications.

We offer our customers one-stop-shopping for satellite ground station technologies, including SCPC and TDMA modems, amplifiers, frequency converters and network software for customers who utilize satellite communications.

Our products are used to modulate, demodulate and amplify signals, carry voice, video and/or data over networks and are vital to satellite communication applications, including air-to-ground communications, video broadcasting and the backhaul of cellular traffic.

Our Commercial Solutions segment manufactures most of the satellite ground station equipment we sell to our customers including equipment sold by our Government Solutions segment.

We believe that the overall satellite ground station equipment industry will grow over the next few years.

This growth is expected to occur as a result of widespread deployment and upgrades of ground-based systems, including satellite earth stations, as well as integration of high-performance amplifiers used for high-performance systems necessary to meet long-term demand for high-performance applications of satellite communications technologies, such as satellite-based wireless backhaul, DTH, HD and 4K broadcasting and in-flight connectivity.

We believe that Comtech is well positioned to capitalize on this demand through sales of our market leading satellite ground station technologies.

Our Commercial Solutions segment manufactures most of the satellite ground station equipment we sell to our customers.

We believe that the overall satellite ground station equipment industry will grow over the next few years, and will be increasingly connected to existing and new cellular networks.

This growth is expected to occur as a result of widespread deployment and upgrades of 4G and 5G ground-based systems, including satellite earth stations, as well as the integration of high-performance amplifiers necessary to meet long-term demand for high-performance satellite communications applications, such as satellite-based wireless backhaul, DTH, HD and 4K broadcasting and in-flight connectivity.

We believe that Comtech is well positioned to capitalize on this demand through sales of our market leading satellite ground station technologies, including new next-generation satellite earth station technologies that can be used with the thousands of new LEO, MEO and large HTS satellite constellations that are reportedly being launched over the next several years.

Examples of end-market applications that are driving long-term demand for our satellite-based communication technologies include:

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In developing regions of the world and in remote areas where terrestrial network infrastructure is lacking, wireless network operators often backhaul, or transport, their wireless data traffic using satellite-based networking technologies.

Comtech is well positioned to serve the high-performance, high availability needs of satellite-based cellular backhaul through sales of our satellite modems including our Heights TM networking platform.

• New High Throughput Satellites.

There are more than 100 new High Throughput Satellite ("HTS") payloads expected to launch over the next decade which we believe is expected to lead to increasingly complex satellite networks.

As service providers work to offer connectivity to these high-speed, high-bandwidth satellites and expand their networks to handle the demand for new HTS applications, we believe our Heights TM networking platform will be incorporated into many new installations and necessary upgrades of equipment.

• High Definition and Ultra-High Definition Broadcasting.

Reports indicate that in recent years, consumers have purchased millions of HD televisions and Ultra-High Definition or "4K" televisions.

Comtech is well positioned to serve the high-performance, high availability needs of satellite-based cellular backhaul through sales of our SCPC and TDMA satellite modems as well as our Heights TM and UHP networking platforms.

• New LEO, MEO and HTS Satellites.

There are thousands of new satellites reportedly being launched over the next several years, which believe will lead to increasingly complex satellite networks.

As service providers work to offer connectivity to these high-speed, high-bandwidth satellites and expand their networks to handle the demand for new LEO, MEO and HTS applications, we believe our Heights TM and UHP networking platforms, our solid-state amplifiers and our X/Y antennas will ultimately be incorporated into many new installations and necessary upgrades of equipment.

• High Definition and Ultra-High Definition Transmission.

Reports indicate that in recent years, consumers have purchased millions of HD televisions and Ultra-High Definition or "4K" televisions and streaming high-definition videos over mobile devices.

We believe this will require a significant amount of satellite bandwidth, which will require satellite service providers to upgrade equipment and find new ways to manage the cost and transmission efficiency of their networks.

We believe that these requirements will drive increased demand for our satellite ground station technologies.

• Integration of Satellite Systems into 911 Systems.

911 service is a vital part of the U.S.

government's nationwide emergency response and disaster preparedness system.

In recent years, the FCC has taken steps to increase public safety by encouraging and coordinating development of a nationwide, seamless communication system for emergency systems.

Increasingly, satellite services are playing a more important role in the nationwide 911 network not only in rural areas but as back-up for Public Safety Answering Points ("PSAP") and individual callers.

For instance, in August 2021, it was reported that Apple was developing satellite capabilities for its iPhone models that would allow users to call and/or send texts in emergency situations.

We believe that satellite systems, supported by our SCPC and TDMA networking platforms, will be incorporated into 911 systems.

Given our expertise in public safety and location technology solutions, we believe we are uniquely positioned to be a leader in this growing market.

Public Safety and Location Technologies

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Our next generation solutions enable rich, multimedia information to be delivered with 911 calls;

our E911 call routing solutions allow cellular carriers and over the Internet ("VoIP") carriers to deliver emergency calls to Public Safety emergency call centers nationwide.

our E911 call routing solutions allow cellular carriers and voice over the Internet ("VoIP") carriers to deliver emergency calls to Public Safety emergency call centers nationwide.

When someone places an emergency call, our technologies can identify the call as an emergency call, access the user’s location information from the wireless network and route the call to the assigned public safety jurisdiction.

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telecommunication carriers, the largest being Verizon for which we provide their 911 call routing via cellular service.

We believe the largest portion of the market for 911 cellular call routing service is split approximately equally between us and our leading competitor.

We believe we service a significant portion of the carrier market for 911 cellular call routing applications, along with another leading competitor.

In addition to 911 call routing, we provide systems integration, satellite and location infrastructure terminals, and linkage to NG-911 Emergency Services IP Networks ("ESInet").

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adopts upgraded call handling and NG-911 solutions, we believe that other countries will do so as well.

Our public safety and location technology solutions have been deployed since 2006 and are utilized by MNOs nationally as well as internationally to provide reliable device location determination for public safety and commercial applications.

Our public safety and location technology solutions have been deployed since 2006 and are utilized by domestic MNOs as well as internationally to provide reliable device location determination for public safety and commercial applications.

Many of our technologies, such as positioning, mapping and text messaging, are embedded in our public safety and location offerings to help address mapping, routing and geolocations.

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Our text messaging platforms are used by wireless carriers to provide SMS to their end-customers and are also used to communicate with 911 PSAPs through major network operators.

In order to maximize market growth opportunities, we are repositioning certain of our location technology solutions to increase our penetration into the public safety space.

Although the market remains very competitive and the sales cycles are long, we believe demand for our public safety and location technologies will continue to grow and customers will continue to look for a more integrated solution.

In order to maximize market growth opportunities, we have repositioned certain of our location technology solutions to increase our penetration into the public safety space and are focusing on international markets.

As satellite services play a more important role in the nationwide 911 network, we believe demand for our location products will grow.

Our Location Studio TM platform enables customers, especially public safety agencies, to build their own applications with end-user functionality, such as maps, search, geocoding, routing and navigation, using their own brand.

We believe that customers and prospects are increasingly looking for alternatives to mapping services that are subject to change by the provider and which meet market privacy and security requirements.

As such, we are integrating our Trusted OpenStreetMap ("TOSM") technologies into our portfolio which will enhance the value proposition by providing rich maps and data while addressing privacy requirements.

Our location technology solutions enable the determination of a mobile phone's geospatial position in a variety of environments leveraging a wide range of signals including Global Positioning System ("GPS"), Global Navigation Satellite Systems ("GNSS") and cellular technologies.

For our installed base of systems, we provide ongoing operational support, including administration of system components, system optimization, configuration management, and maintenance services, including tracking customer support issues, troubleshooting and developing and installing maintenance release.

The Location Studio TM platform is a complete end-to-end location application consisting of maps, map data, including our Trusted OpenStreetMap ("TOSM") geo-services, application program interfaces ("APIs") and software development kits ("SDKs") enabling public safety ecosystems and enterprises to build custom and unique mapping applications.

Map data includes positioning, search, enhanced local content, custom maps, navigation, geo-fencing, tracking integrated with third party data sources like camera feeds and Internet of Things ("IoT") sensor data via cross-platform APIs and SDKs supporting all leading operating systems.

We believe that as the industry moves toward digital transformation, customers will be looking for situational awareness solutions that are built on top of mapping and geo-services.

Our location technology solutions enable the determination of a mobile phone's geospatial position in a variety of environments, leveraging a wide range of signals including Global Positioning System ("GPS"), Global Navigation Satellite Systems ("GNSS") and multiple cellular positioning technologies ranging from 2G through 5G mobile networks.

For our installed base of systems, we provide ongoing operational support, including administration of system components, system optimization, configuration management and maintenance services, including tracking customer support issues, troubleshooting and developing and installing maintenance releases.

In fiscal 2022, we have begun marketing Smart Response TM , a newly developed cloud-based solution, that offers a common operational picture to first responders for an effective data-driven response for security agencies and first responders.

This new solution can offer streaming live feeds from traffic cameras at and near incident location, access caller information like past residences, criminal history, or next-of-kin information at the tap of a button.

Offering a bird-eye view of integrated data, the Smart Response TM solution empowers PSAP employees to ensure the appropriate resources are on the scene and to better serve the public in emergency situations.

Government Solutions Segment

Our Government Solutions segment provides mission-critical technologies (such as tactical satellite-based networks and ongoing support for complicated communication networks) and high-performance transmission technologies (such as troposcatter systems and solid-state, high-power amplifiers) to large government end-users (including those of foreign countries), large international customers and domestic prime contractors.

Our Government Solutions segment provides tactical satellite-based networks and ongoing support for complicated communications networks, troposcatter systems and solid-state, high-power amplifiers to large government end-users (including those of foreign countries), large international customers and domestic prime contractors.

Key Markets and Technology Solutions

Mission-Critical Technologies

Tactical Communications Technologies

With persistent threats from state and non-state actors, governments around the world are increasingly seeking ways to mitigate vulnerabilities using information and more reliable communication systems to increase decision-makers’ situational awareness.

In response to this demand, we offer a variety of mission-critical technologies including the supply and field support of tactical satellite-based networks (including satellite modems, ruggedized routers and solid-state drives), sustainment services for the AN/TSC-198A SNAP (Secret Internet Protocol Router ("SIPR") and Non-classified Internet Protocol Router ("NIPR") Access Point), Very Small Aperture Terminals ("VSATs") and sustainment services for the U.S.

Army’s Blue Force Tracking-1 ("BFT-1") system.

In response to this demand, we offer a variety of mission-critical technologies, including the supply and field support of tactical satellite-based networks (including satellite modems, ruggedized routers and solid-state drives), sustainment services for the AN/TSC-198A SNAP (SIPR and NIPR Access Point) VSATs.

Many of our mission-critical technologies are part of integrated communication infrastructure systems such as the U.S.

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Our solutions include supply chain management and engineering services for high reliability EEE space parts and satellite and launch vehicle tracking solutions in support of critical National Aeronautics and Space Administration ("NASA") programs and for international space and defense agencies.

Through our acquisition of CGC Technology Limited, we are also a leading, world-wide provider of high precision, full motion fixed and mobile X/Y satellite tracking antennas, RF feeds, reflectors, radomes and other ground station equipment.

Through our acquisition of CGC Technology Limited, we are also a leading, world-wide provider of high precision, full motion fixed and mobile X/Y satellite tracking antennas, reflectors, RF feeds, radomes and other ground station equipment.

High-Performance Transmission Technologies

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military and designated the Tactical Transportable TROPO ("SNAP 3T") or AN/TRC 198(V3).

We recently introduced the Comtech COMET, a rapidly deployable OTH microwave system.

The Comtech COMET has a medium range (up to 60 km) and high bandwidth (up to 210 Mbps) that fills a void in distances that have long been desired by tactical communications planners.

It uniquely addresses the special operations command (or “SOCOM”) community’s concern of low probability of intercept and low probability of detection (“LPI/LPD”), while providing high reliability, mission essential communications.

Our solid-state, high-power amplifiers and related switching technologies are utilized in several critical applications including electronic warfare, communications, radar, IFF and medical applications such as oncology cancer treatment systems.

In the electronic warfare marketplace, we support a variety of legacy systems and are participating in the ongoing migration to platforms that require smaller and lighter amplifiers.

We also recently introduced the Comtech COMET TM , a rapidly deployable OTH microwave system.

The Comtech COMET TM has a medium range (up to 60 km) and high bandwidth (up to 210 Mbps) that fills a void in distances that have long been desired by tactical communications planners.

The Comtech COMET TM uniquely addresses the special operations command (or “SOCOM”) community’s concern of low probability of intercept and low probability of detection (“LPI/LPD”), while providing high reliability, mission essential communications.

Our solid-state, high-power RF microwave amplifiers and related switching control technologies are utilized in several critical applications, including electronic warfare, communications, radar, IFF and medical applications such as oncology cancer treatment systems.

In the electronic warfare marketplace, we support a variety of legacy systems and are participating in the ongoing migration to platforms that require smaller and lighter amplifiers integrated with additional signal processing functionality.

Our solutions increase the flexibility of systems by providing wider bandwidth capabilities to address communication needs.

We also believe that the desire for increased situational awareness of the airspace may create increased opportunities for our radar and IFF products, which are used by government customers around the world.

Our high power and highly reliable Gallium Nitride ("GaN") amplifier technology is increasingly used both to update existing radar systems for improved sensitivity and range as well as for new radar installations.

In addition to technologies that enhance performance of primary radars, we also supply solutions for IFF systems that provide positive identification of radar targets.

In addition to technologies that enhance performance of primary radars, we also supply solutions for IFF systems that provide positive identification of radar targets for secondary surveillance systems.

In order to position ourselves to take advantage of additional growth opportunities and meet our strategic objectives, we have followed, and will continue to follow, a disciplined approach in identifying, executing and capitalizing on acquisitions.

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On February 23, 2016, we acquired TeleCommunication Systems Inc.

("TCS"), a leading provider of commercial solutions (such as public safety and location technologies) and government solutions (such as mission-critical technologies).

("TCS"), a leading provider of commercial solutions (such as public safety and location technologies) and government solutions (such as tactical communications technologies).

The TCS acquisition had an aggregate purchase price for accounting purposes of $340.4 million (also referred to as the transaction equity value) and an enterprise value of $423.6 million.

The TCS acquisition, which has been fully integrated into our business, resulted in Comtech entering complementary markets and expanding our domestic and international commercial offerings.

On February 28, 2019, we completed our acquisition of Solacom, a leading provider of Next Generation 911 ("NG-911") solutions for public safety agencies.

On February 28, 2019, we completed our acquisition of Solacom, a leading provider of NG-911 solutions for public safety agencies.

The acquisition of Solacom was a significant step in our strategy of enhancing our public safety and location technologies.

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(the "GD NG-911 business") and at the same time announced a five-year contract award in excess of $100.0 million to develop, implement and operate a NG-911 emergency communications system for a Northeastern state.

The acquisition strengthened Comtech’s position in the growing NG-911 solutions market.

The acquisition strengthened our position in the growing NG-911 solutions market.

The GD NG-911 business had an aggregate purchase price for accounting purposes of $11.0 million and was fully integrated into our Commercial Solutions segment.

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CGC is a leading provider of high precision full motion fixed and mobile X/Y satellite tracking antennas, reflectors, RF feeds, radomes and other ground station equipment around the world.

The acquisition brought established relationships with several top-tier European aerospace companies and other government entities, and we expect it to allow us to participate in the anticipated growth in the number of low Earth orbit ("LEO") and medium Earth orbit ("MEO") satellite constellations.

The CGC business has a preliminary purchase price for accounting purposes of $23.7 million and was fully integrated into our Government Solutions segment.

The CGC business had an aggregate purchase price for accounting purposes of $23.7 million and was fully integrated into our Government Solutions segment.

On February 21, 2020, we acquired NG-911, Inc.

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The acquisition allows us to cost-effectively expand sales of our industry leading Solacom Guardian call management solutions for public safety.

The NG product line had a preliminary purchase price for accounting purposes of $1.2 million and was fully integrated into our Commercial Solutions segment.

Pending Acquisitions of UHP and Gilat

On November 21, 2019, we announced that we entered into an agreement to acquire UHP, a leading provider of innovative and disruptive satellite ground station technology solutions.

UHP is primarily based in Canada and has developed revolutionary technology that is transforming the Very Small Aperture Terminal (“VSAT”) market.

With end-markets for high-speed satellite-based networks significantly growing, our acquisition of UHP will allow us to enhance our solution offerings with low cost TDMA satellite modems which we do not currently offer.

In June 2020, we agreed with UHP to amend the terms of our purchase agreement which resulted in the total aggregate purchase price being reduced by approximately 24% from $50.0 million to $38.0 million (of which $5.0 million will be paid in cash, with the remainder in shares of our common stock, cash, or a combination of both, as we may elect at the time of closing).

The transaction is subject to customary closing conditions, including regulatory approval to allow us to purchase UHP's sister company which is headquartered in Moscow.

If we do not receive approval by December 31, 2020, either we or UHP may terminate the purchase agreement.

Additional discussion and information about the pending UHP acquisition can be found in " Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations – Acquisition Plan Update."

On January 29, 2020, we announced a highly strategic acquisition of Gilat, a worldwide leader in satellite networking technology, solutions and services, with market leading positions in the satellite ground station and in-flight connectivity solutions markets and deep expertise in operating large network infrastructures.

After we announced this acquisition, the COVID-19 pandemic resulted in a sudden and steep decline in the travel and aviation markets in which many of Gilat’s customers operate and a significant slowdown in Gilat's business.

Based on the terms agreed to on January 29, 2020 and the September 24, 2020 closing price of Comtech Common Stock of $13.32 per share, the total amount payable to Gilat shareholders would have been approximately $465.8 million (consisting of approximately $402.9 million in cash with the remainder in Comtech Common Stock) or $8.30 per Gilat ordinary share.

In July 2020, we commenced litigation in the Delaware Court of Chancery (the “Delaware Court”) seeking certain declaratory judgments, including a declaratory judgment that Gilat has suffered a Material Adverse Effect (as defined in the Merger Agreement) and that, as a result, we are not obligated to complete the acquisition of Gilat.

The amended complaint also seeks a declaratory judgment that certain actions, if taken by Gilat, relating to Comtech’s application for Russian regulatory approval, would breach Gilat’s obligations under the Merger Agreement.

Gilat subsequently sued in the Delaware Court for declaratory judgments, including that it has not suffered a Material Adverse Effect and that Comtech has not used reasonable best efforts to obtain Russian regulatory approval for the transaction.

To-date, we incurred significant amounts of legal expenses and professional fees in connection with the litigation and a trial is scheduled for October 5, 2020.

The Delaware Court has indicated that it intends to render a judgment prior to October 29, 2020, the date that we or Gilat may terminate the Merger Agreement.

Litigation related to Gilat is further discussed in "Notes to Consolidated Financial Statements - Note (13)(a) - Commitments and Contingencies - Legal Proceedings and Other Matters" included in "Part II - Item 8.- Financial Statements and Supplementary Data," included in this Annual Report on Form 10-K.

The NG-911 product line had an aggregate purchase price for accounting purposes of $1.2 million and was fully integrated into our Commercial Solutions segment.

On March 2, 2021, we completed our acquisition of UHP Networks Inc.

("UHP"), a leading provider of innovative and disruptive satellite ground station technology solutions.

With end-markets for high-speed satellite-based network anticipated to significantly grow, our acquisition allows us to enhance our Commercial Solutions segment's offerings with low cost TDMA satellite modems.

The UHP business has a preliminary purchase price for accounting purposes of $37.5 million and was fully integrated into our Commercial Solutions segment.

Sales, Marketing and Customer Support

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government and large mobile wireless operators) to market our technology solutions.

In fiscal 2022, we expect to significantly expand our social media and Internet presence and develop an updated marketing and branding strategy.

We are pre-qualified as an approved vendor for certain government contracts.

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Sales to U.S.

government customers include sales to the U.S.

Department of Defense ("DoD"), intelligence and civilian agencies, as well as sales directly to or through prime contractors.

government customers include sales to the DoD, intelligence and civilian agencies, as well as sales directly to or through prime contractors.

Domestic sales include sales to commercial customers, as well as to U.S.

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domestic companies for inclusion in products that are sold to international customers) were $138.9 million, $145.1 million and $170.6 million, respectively.

When we sell internationally, we denominate virtually all of our contracts in U.S.

When we sell internationally, we denominate most of our contracts in U.S.

Some of our sales to international customers are paid for by letters of credit or on an open account.

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government) are subject to modification, cancellation at the convenience of the customer, or for default in the event that we are unable to perform under the contract.

As of July 31, 2020, we performed a detailed review of our backlog, including assessing the impact of the COVID-19 pandemic, the consolidation of two mobile carriers in the United States and unused contract commitments.

Based on such review, we reduced our backlog as of July 31, 2020 by $29.8 million, which represented orders received in prior periods that we no longer believed met our definition of firm.

A significant portion of the backlog from our U.S.

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We employ formal quality management programs and other training programs, including the International Standard Organization’s quality procedure registration programs.

We operate a high-volume technology manufacturing center located in Tempe, Arizona.

This manufacturing center is operated by our Commercial Solutions segment and can be utilized, in part, by our Government Solutions segment and by third-party commercial customers, including prime contractors to the U.S.

government, who can outsource a portion of their product manufacturing to us.

Increased usage of our high-volume technology manufacturing center allows us to secure volume discounts on key components, better control the quality of our manufacturing process and maximize the utilization of our manufacturing capacity.

To support our long-term business goals for our satellite earth station product line, in September 2020, we signed a 15-year lease for a 146,000 square foot facility in Chandler, Arizona.

This facility is located less than 10 miles from our existing facility, and we anticipate that that we will be fully relocated to this new facility by February 2021.

All of our other manufacturing facilities are located in the United States except for a facility in the United Kingdom which manufactures our high precision X/Y satellite tracking antenna product line.

To support our long-term business goals, in fiscal 2021, we commenced a 15-year lease for a new 146,000 square foot facility in Chandler, Arizona and began shifting production of our satellite earth station products from our existing Tempe, Arizona locations.

We also signed a new 10-year lease in the United Kingdom to expand our Government Solutions segment's manufacturing capabilities.

This facility is expected to support the production of X/Y satellite tracking antennas that can be used in connection with the thousands of new LEO, MEO and large HTS satellite constellations reportedly being launched over the next several years.

COVID-19 has delayed efforts to get our new technology manufacturing centers operational and has increased our start-up costs.

Although things can be further delayed, we anticipate that our new facilities will be operational by the end of our fiscal 2022 or early part of fiscal 2023.

Increased usage of our high-volume technology manufacturing centers will allow us to secure volume discounts on key components, better control the quality of our manufacturing process and maximize the utilization of our manufacturing capacity.

All of our other manufacturing facilities are located in the United States.

Our ability to deliver products to customers on a timely basis is dependent, in part, upon the availability and timely delivery by subcontractors and suppliers (including, at times, the U.S.

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Delays in receipt of such parts can adversely impact the timing of our performance on the related contracts.

While not individually material, during fiscal 2021, as a result of COVID-19, we have experienced longer lead times for certain components and raw materials from certain suppliers as well as higher freight costs due to an overwhelmed global transport network.

We expect that these supply chain issues will ease during the second half of fiscal 2022.

Research and Development

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Customer-funded research and development activities relate to the adaptation of our basic technology to specialized customer requirements which is recoverable under contracts and is reflected in net sales with the related costs included in cost of sales.

Certain of our government customers contract with us from time to time to conduct research on telecommunications software, equipment and systems.

Certain of our government customers also contract with us from time to time to conduct research on telecommunications software, equipment and systems.

During fiscal 2021, 2020 and 2019, we were reimbursed by customers for such activities in the amounts of $13.6 million, $11.9 million and $14.7 million, respectively.

During fiscal 2021, we incurred $0.3 million of strategic emerging technology costs for next-generation satellite technology to advance our solutions offerings to be used with new broadband satellite constellations.

We are evaluating this new market in relation to our long-term business strategies, and we may incur additional costs in fiscal 2022.

Intellectual Property

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The products we sell require significant engineering design and manufacturing expertise.

For these technological capabilities that are not protected by patents or licenses, we generally rely on the expertise of our employees and our learned experiences in both the design and manufacture of our products and the delivery of our services.

For technological capabilities that are not protected by patents or licenses, we generally rely on the expertise of our employees and our learned experiences in both the design and manufacture of our products and the delivery of our services.

Some of our key Commercial Solutions segment technology is protected by patents that are significant to protecting our proprietary technology.

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To-date, our strategy has been to avoid offensive and defensive patent litigation and focus on building meaningful partnerships with other companies through direct licensing, cross licensing, and other forms of agreements.

We do not believe that any single patent or group of patents, patent application or patent license agreement is material to the Company’s operations.

We do not believe that any single patent or group of patents, patent application or patent license agreement is material to our operations.

We have filed additional patent applications for certain apparatus and processes we believe we have invented covering key features of the location services, wireless text alerts, SMS Center, mobile-originated data and E911 network software.

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Due to our proprietary know-how, we believe we can develop, produce and deliver products and services on a cost-effective basis faster than many of our competitors.

Human Capital

At July 31, 2021, we had 2,038 employees (including temporary employees and contractors), 1,238 of whom were engaged in production and production support, 420 in research and development and other engineering support, and 380 in marketing and administrative functions.

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The government may challenge a supplier's costs and fees.

Suppliers are also required to comply with the National Industrial Security Program Operating Manual which relates to requirements regarding classified materials and programs.

Suppliers are also required to comply with the National Industrial Security Program Operating Manual which relates to the handling of classified materials and programs and is administered by the Defense Counterintelligence and Security Agency (“DCSA”).

Suppliers who do not comply with these various regulations may lose and/or become ineligible for facility security clearances and/or participation in classified programs.

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Department of the Treasury’s Office of Foreign Assets Control ("OFAC"), the Department of Commerce ("DoC") as well as other applicable laws relating to trade, export controls and foreign corrupt practices, the violation of which could adversely affect our operations.

We cannot be certain that we will be able to obtain necessary export licenses, and such failure would materially adversely affect our operations.

If we are unable to receive appropriate export authorizations in the future, we may be prohibited from selling our products and services internationally, which may limit our sales and have a material adverse effect on our business, results of operations and financial condition.

We must comply with all applicable export control laws and regulations of the U.S.

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government agencies for export from the U.S., and some of our products are not permitted to be exported.

We cannot be certain that we will be able to obtain necessary export licenses, and such failure would materially adversely affect our operations.

In addition, in certain cases, U.S.

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In addition, we have made various commitments to U.S.

government agencies that oversee trade and export matters that we will maintain certain policies and procedures including maintaining a company-wide Office of Trade Compliance.

Also, we have agreed to have independent audits in future periods and will report any future violations to those agencies.

On September 17, 2020, we reported that we reached an agreement with OFAC resolving an investigation pending since 2014.

In October 2014, as previously disclosed in our SEC filings, we reported to OFAC following a self-assessment of our export transactions that a shipment of modems sent to a Canadian customer by Comtech’s subsidiary, Comtech EF Data Corp., was incorporated into a communication system, the ultimate end user of which was the Sudan Civil Aviation Authority.

The sales value of our equipment was approximately $288,000.

At the time of shipment, OFAC regulations prohibited U.S.

persons from doing business directly or indirectly with Sudan.

Most of the U.S.

sanctions related to Sudan were removed in 2017.

After we reported the matter to OFAC, we responded to administrative subpoenas and OFAC initiated an investigation into the matter.

Pursuant to the agreement, we will make a payment to OFAC of $894,111 and implement additional internal compliance commitments, a number of which were already in process.

Additionally, we committed to creating a new position of Chief Trade Compliance Officer.

Even though we take precautions to avoid engaging in transactions that may violate U.S.

export control laws or regulations, including trade sanctions, those measures may not be effective in every instance.

If it is determined that we have violated U.S.

export control laws, civil and criminal penalties could apply, and we may suffer reputational harm.

government agencies that oversee trade and export matters that we will maintain certain policies and procedures including maintaining a company-wide Office of Trade Compliance and conducting ongoing internal assessments and reporting any future violations to those agencies.

Our financial reporting, corporate governance, public disclosure and compliance practices are governed by laws such as the Sarbanes-Oxley Act of 2002, Dodd-Frank Act of 2010, and rules and regulations issued by the SEC.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business